Mary Zeni, a 70-year-old widow and retired communications specialist, is one of 110 senior citizens who this month moved into a newly opened retirement community in northwest suburban Des Plaines.
“I can’t believe I’m living like this,” exclaimed the Boston native who moved to Chicago in 1960 with her late husband and lived on Lake Shore Drive. “This is not just a retirement home. You can call it a spa, a resort, a very fancy hotel. It’s absolutely beautiful.”
Her enthusiasm for a new-found lifestyle is directed at The Heritage, a $28 million, 10-story complex developed by The Prime Group.
The Heritage is just one example of the turnaround that has occurred in the senior market: Retirement housing, buffeted by financial woes and failed projects in the 1980s, once again is becoming a hot industry in the Chicago area.
“There was a lot of excitement in real estate circles about senior housing during the 1980s, but some of the developers didn’t know what they were doing,” said Mark J. Schulte, vice president of development and operations for The Prime Group’s senior housing division. “This is not the real estate business; it’s a service business.”
“This is a very young, fragmented industry that needs to mature,” he said. “There’s been a lot of shakeout during the past five years as the industry has suffered from unrealistic lease-up expectations, poor site locations and ill-conceived projects. Nevertheless, there is a lot of potential for the future.”
Some of that potential already is being realized.
Jean Elliott, director of program development for the 160-member Illinois Retirement Housing Association, said the group’s membership has soared by 20 percent since 1989, in large part “because there definitely is healthy growth in retirement housing as consumers become better educated and find it to be a more acceptable lifestyle.”
But, as evidenced by The Heritage, those seeking success in the senior housing field today must heed an important tenet: Retirement developments can’t be approached as real estate projects.
“This is specialized marketing because the apartment itself is not why the senior is coming,” said Katherine Pistone Erickson, vice president of marketing and sales at the development.
“This kind of community requires a personality type that’s appropriate to communal living. They are joiners into clubs and activities. They like a busy environment and need services,” she said.
Developers of senior housing must have a different mind-set today than in the 1980s, agreed William B. Kaplan, chairman of Chicago-based Senior Lifestyle Corp.
“There have been failures because developers didn’t understand the business or know its marketing,” he said. “The Resolution Trust Corp. and other lenders have had to take some projects back for default. Just because you build doesn’t mean people will come.”
This new understanding has led to significant changes in the industry, Kaplan said.
Until recently, financial support for most retirement centers has come from endowments or life estate programs, or the units have been sold as condominiums. This has shifted to an emphasis on monthly rentals.
“Most new developments are rental with residents choosing from a variety of services and programs. They pay for what they need,” Elliott said.
The 258-unit Heritage, at River Road and Ellinwood Avenue in downtown Des Plaines, shows how popular rentals can be. It already is 65 percent leased-40 percent ahead of projections-and should be fully occupied by fall 1994, according to Erickson.
“People prefer a fee or rental basis because it doesn’t tie up their dollars,” said Kaplan, whose Senior Lifestyle firm owns and/or manages more than 2,500 retirement housing units in Chicago, Florida and Colorado.
Developers also are finding that senior housing projects must be targeted to a population older than they once anticipated.
“New residents of senior centers are primarily singles in the 80 to 82 age bracket as people 65 to 75 remain more active and independent,” Kaplan said. “With better health and longer life expectancies, the 60s and 70s increasingly have become an extension of middle age.”
Senior Lifestyle’s flagship development, opened in 1988 on Sheridan Road in Chicago, is the 33-story Breakers at Edgewater Beach, which has 476 studio, one- and two-bedroom units. Other area projects include The Breakers at Golf Mill in Niles and Hyde Park Tower and Granada Centre in Chicago.
Overall occupancy is 95 percent, according to Kaplan.
“This success substantiates my belief that we are creating a lifestyle and environment, not building real estate,” he said. “Retirement housing is not for the fast-buck artist, however. You need to be in it for the long haul and be prepared to pour back money into the building to keep it fresh, alive and non-institutional.”
At Senior Lifestyle, for instance, a full- and part-time staff of 500 includes specialists in food service, programming, marketing, law, human resources, finance, maintenance and housekeeping.
In addition to reshaping their own organizations to cope with the changing market, senior housing developers increasingly are forming partnerships with health-care institutions as well as shifting management duties to professional firms with experience in the field.
“Retirement housing is not a mainline for real estate developers because you need an institutional framework for service and expertise,” said Jerry James of The James Cos., which is developing 59 attached cottages for the 60-year-old King-Bruwaert House on County Line Road in west suburban Burr Ridge.
King-Bruwaert House is a not-for-profit retirement community that includes a 35-bed health center with skilled nursing care. The typical move-in is between the ages of 80 and 85.
By contrast, residents of the cottages-called The Woods of King-Bruwaert-are couples in their early 70s who want independent, maintenance-free housing, but are planning ahead for a time when they may need assisted living, according to sales manager Bonnie Warden.
Phase 1 preconstruction marketing opened in April with all but two of 25 units taken by the time construction began this month. First deliveries are planned for January 1994, Warden said, with more than 35 prospects awaiting the start of 34 units in the project’s second phase.
Residents pay initial entry fees of $234,500 to $310,000 and monthly assessment fees to cover maintenance services for the two-bedroom cottages on a 13-acre wooded site adjacent to the retirement center.
The King-Bruwaert Woods Corp. retains ownership and assumes responsibility for management and remarketing for all residences. Upon remarketing, entry fees are refundable to the resident, or the resident’s estate, based on how much the next resident pays. The refund would be equal to the resale price, but only up to and not exceeding 100 percent of the original fees.
The cottages’ success runs counter to most developers’ views that rental communities afford the most growth potential in the senior housing industry. But it does point out that the market still is extremely varied and that no one concept is likely to dominate.
Also bucking the rental-preference trend is Luther Village in northwest suburban Arlington Heights, being developed by The Shaw Company on a 58-acre self-contained campus adjacent to the century-old Lutheran Home.
The $100 million non-denominational community at 1280 Village Drive is planned for 668 housing units being developed in affiliation with Lutheran Home Health Care Services, which is providing expertise in senior care and health services.
“The industry has learned it’s essential to link up with an institution for health care and gerontology expertise if the development is to be successful,” said Thomas W. Prescott, senior vice president of The Shaw Company.
Sales began in 1989. With 255 units completed, more than 210 have been sold. Luther Village has 275 residents in its lakeside Courtyard units, villas and two four-story buildings.
“Sales were flat during 1990 and 1991 because of the Gulf War, a slow home resale market and uncertainty over the economy,” Prescott said. “Since mid-1991, however, sales have been stronger.”
Luther Village provides cooperative ownership plus a monthly fee for services that ranges from $425 to $950 depending on size and type of unit.
Construction began in July on Bradley House, Luther Village’s second mid-rise building with 139 units priced from $99,000 to $209,000; floor plans include one bedroom, one bedroom with den, two bedrooms and two bedrooms with den.
Already 40 percent sold, the building is expected to be sold out when completed in August 1994, Prescott said. The first mid-rise, Arlington House, has only one of its 129 units left.
Sales also have accelerated for the two-bedroom, two-bath Courtyard units with attached garages in six-unit buildings. Forty of 60 planned units, priced from $203,500, have been sold. They are available with lofts, fireplaces, basements and patios that can be screened or enclosed.
A total of 96 Villa units priced from $201,000 are planned for the site’s perimeter. Built in clusters of four, the two-bedroom, two-bath homes have attached garages and are available with a loft or basement. Prescott said 38 Villas have been sold with 44 built or under construction.
Despite the success of individual retirement centers, one problem remains unresolved, according to Elliott.
“Nearly all new developments are geared to higher-income seniors, leaving a void in facilities for people with moderate or middle incomes,” she said. Monthly rentals in the Chicago area for a one-bedroom unit with one or two meals a day average $1,275 to $2,115.
“There definitely is a lack of availability of affordable housing,” Elliott said, adding that it is a major concern of her association.
Kaplan said Senior Lifestyle is developing a concept for senior housing in city neighborhoods that would offer optional services and be geared to those with annual incomes around $20,000.
At the moment, however, it is projects like the The Prime Group’s Heritage development that serve as the template for the latest senior housing ideas-a showcase in the trend toward more sophistication in retirement housing.
At capacity it will accommodate 300 residents with a choice of 22 floor plans among 75 studio, 116 one-bedroom and 35 two-bedroom units. There are another 30 studio units in the assisted living program.
Monthly rents range from $900 to $2,250, with unit sizes ranging from 420 to 1,050 square feet.
Facilities include a general store, beauty/barber shop, bank, ice cream parlor, billiards room, indoor swimming pool, arts and crafts center, health and fitness center and an on-site wellness program operated through a health partnership with Holy Family Hospital of Des Plaines.
“This is a lifestyle choice, not a housing choice,” said Schulte of The Prime Group, a diversified Chicago-based real estate development firm. To date, Prime has built or acquired more than 1,100 rental units in metropolitan Chicago and Texas.
Mary Zeni, by her own admission, is a perfect match for such a lifestyle.
“I felt lost, alone and without identity after I retired from 32 years with Atlantic Richfield Oil Co.,” she said. “I’ve been with people all my life, and the doctor said I needed to be with people again.
“This is such a happy, joyful place,” she said. “I couldn’t be happier if I’d won the Lotto.”
